procurement & contract management - mr s ghosh
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Procurement & Contract Management - By S GhoshTRANSCRIPT
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Project Management Consultant for PMGSY Rural Roads Project in Jharkhand
(World Bank Funded)
Procurement and Contract Management 30 Aug 2013Presented by:
Soumitra Ghosh General Manager,
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PROCUREMENT PLAN
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PROCUREMENT PLAN Mode of Bidding
National Competitive Bidding (NCB) International Competitive Bidding (ICB)
Criteria of NCB or ICB (e.g. Contract upto Rs. 100 Crore- NCB, above- Rs. 100 Crore- ICB etc.)
Others e.g. Whether on-line or off-line bidding, Time frame for bidding, evaluation etc.
Formation of Tender Evaluation Committee Technical Committee Financial Committee
Approving Authority3
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PROCUREMENT PROCESS FLOW
Receipt of Offers (Technical & Price)
Cost of RFP document accompanying tender
Earnest Money Deposit accompanying tender
Opening of Technical Bids
Price Bids kept un-opened and sealed
Evaluation of Technical Proposal
Evaluation of Commercial Terms & Conditions
Announcement of Qualified Bidders
Opening of Price Bids of Qualified Bidders
Price Bids of Unqualified Bidders kept unopened
Evaluation of Price Bids
Placement of Order/ LOI
Return EMD and unopened Price Bids to Unqualified Bidders and
Unsuccessful Bidders
Invitation of Bids
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Bidding Document
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Bidding document Instructions to Bidders
Background information
Source of funding
Type of Bidding, NCB, ICB Procedures to be followed by Bidders in the
preparation and submission of their Bids e.g. whether two part or one part, tax/ duties to be considered, validity, power of attorney etc.
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Bidding Document Evaluation and Qualification Criteria
This Section contains all the criteria that the Employer shall use to evaluate bids and qualify Bidders, such asoTechnical
Experience on similar type of completed jobs Possession of required machinery/ equipment Having qualified technical staff of reqd. experience etc.
oFinancial Criteria Annual Turnover Net worth etc.
oOthers viz. Domestic preference etc.
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Bidding document Technical Specification
o Specificationo Drawingso Reports etc.
General Conditions of Contracto This part is elaborated in the
‘Presentation on Contract Management’
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Bidding Document Particular Conditions of Contract, or
Special Conditions of Contracto This Section deals with the Conditions specially
applicable to the Works under consideration e.g. Time for Completion, Milestones, rate of deduction of Liquidated damage, Insurance etc.
Bidding Formso This Section includes formats for Letter of
Transmittal, Performance Security, Advance, Financial Bid submission forms etc.
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CONTRACT MANAGEMENT
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A Contract is a written Agreement between the parties that is intended to be legally enforceable
A prerequisite requirement for the enforcement of a contract, is that the terms & conditions are accepted by parties of the contract.
WHAT IS A CONTRACT ?
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Contract Management or Contract Administration is the management of Contracts within the provisions and intentions of the Contract accepted by the Parties.
It is the process of systematically and efficiently managing contract creation, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk
WHAT IS CONTRACT MANAGEMENT ?
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A very wide subject to highlight and discuss all aspects of Contract Management
Accordingly only important aspects of the Contract Provisions under the following, which need to be closely monitored will be discussed General Conditions of Contract
Special Conditions of Contract
Technical Specification
An Overview
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Right of Access to the Site Employer shall give the Contractor right of
access to, and possession of, the Site within a specified time
Permits, Licences or Approvals Employer shall provide permits, licences or
approvals required by the Laws of the Country, clearance through customs for the delivery of Goods etc.
Obligation of Employer
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Contractor’s General Obligations The Contractor shall execute and complete the Works in
accordance with the Contract and as per Engineer’s instructions, and shall remedy any defects. This includes Environmental & Social issues also
shall provide the Plant, Personnel, Goods, consumables, material, and services for successful execution of Works as specified in the Contract
shall appoint an Engineer as in-charge of Project and shall give him all authority necessary to act on his behalf for execution of the job.
Overall management of site including Safety of men and machineries.
Obligations of the Contractor
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The Contractor shall furnish (at his cost) a Performance Security for proper performance
This is generally in the form of Bank Guarantee for an amount of 5%- 10% of the Contract Value, as agreed in the Contract
It is normally valid up to Defect Liability period
Performance Security
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Broadly: Engineer named in the document shall carry out the
duties on behalf of the Employer as assigned to him
shall approve all drawings prepared by the Contractor for execution of temporary and permanent Works
He and his team shall supervise, examine, inspect, instruction site activities, take measurements of work done, recommend for payment, extension of time etc.
the Engineer shall determine any prayer for extension of Time for Completion, Variation order, Extra claims and other contractual issues
Engineer’s Duties & Authority
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The Contractor shall carry out the work in accordance with recognized good practice
give the Engineer full opportunity to carry out inspection & testing
rectify the defects, remove and re-execute any work which is not in accordance with the Contract and as directed by the Engineer
WORKMANSHIP
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Contractor shall submit a detailed time programme in the form of Bar Chart/ PERT network immediately after commencement
Extension of Time for Completiono Extension may be sought due to various reasons viz.
non-availability of fronts/ approved drawings/ payments, ordering additional works, hindrances due to local or political issues, Act of God etc. and any other delays Caused by Authorities etc.
WORK PROGRAMME
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If the Contractor fails to complete the work in totality or in parts/ sections, the Contractor shall pay delay damages (or Liquidated Damages) to the Employer for this default.
This may be to the tune of 0.1% of the unfinished work, subject to a maximum of 10% of the Contract Value or otherwise specified in the Contract
DELAY DAMAGES
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The Works and Sections shall be taken over by the Employer when
the Works have been completed in accordance with the Contract,
issue the Taking-Over Certificate mentioning any minor outstanding work and defects which will not substantially affect the use of the Works or Section
However, minor defects shall be made good during the Defect Liability Period
EMPLOYER’S TAKING OVER
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This is the period after the issuance of Completion Certificate, as stated in the Contract, within which period the Contractor shall
o complete any work which is outstanding on the date stated in a Taking-Over Certificate
o execute all work required to remedy defects or damage, as may be notified by the Employer on or before the expiry date of the Defects Notification Period
DEFECT LIABILITY
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Variation may include additional or modified items arising out of extra work, changes to the quality and other characteristics work, omission of any work not previously mentioned
It may be determined from analogous items available in the Contract
The Extra items may also be determined by analysing the labour, material, fuel and other components including Contractor’s overhead & profit.
VARIATIONS & EXTRA CLAIMS
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The Contract Price may be adjusted to take account of any increase or decrease in Cost resulting from rises or falls in cost of labour,
materials
fuel
other inputs to the Works
This is made after the Base Date, by addition or deduction of the amounts determined by the formulae prescribed in the Contract.
However for fixed price Contracts such adjustments are not made
ESCALATION
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Advance Paymento The Employer normally makes an advance payment, when the
Contractor submits a guarantee of equivalent amount, which is adjusted from the Contractor’s bills as a percentage or in installments as stated in the Contract
Interim Paymento The Employer normally makes payment against monthly
Interim Bills, supported by requisite documents
Final Payment o After receiving the Performance Certificate and other
documents e.g. As-Built drawings etc., the full and final payment is made
PAYMENTS
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Employer shall be entitled to terminate the Contract if
o the Contractor unreasonably fails to carry out any obligation under the Contract,
o abandons the Works or otherwise plainly demonstrates the intention not to continue performance of his obligations
o Corrupt or Fraudulent Practices
o Other reasons bankruptcy, insolvency etc.
TERMINATION BY EMPLOYER
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“Force Majeure” means an exceptional event or circumstance which could not reasonably be avoided or overcome by any of the Parties
This may include, but is not limited to
o war, hostilities, invasion, act of foreign enemies, rebellion, terrorism, riot, commotion,
o Act of God (e.g. flood, famine etc.)
FORCE MAJEURE
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When there is a dispute between the Parties, the following steps should be followed
o The Engineer should thoroughly examine the Contractor’s claim and come to a reasonable solution
o The disputes should be mutually and amicably settled
o If the above step fails, the matter should be referred to Dispute Adjudication Board (Board should be formed at the beginning of the Contract)
CLAIMS, DISPUTES
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Any dispute between the Parties neither settled amicably nor through Dispute Adjudication Board, should be referred to Arbitration
Normally each Party nominates one person each, and these two persons mutually select another person, who becomes the Chairman of the Arbitration Board. The decision of Arbitration Board remains final and binding on both the Parties
There are several rules and procedures of Arbitration, viz. Arbitration & Conciliation Act, 1996, United Nations Commission on International Trade Law (UNCITRAL) etc.
ARBITRATION
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The Technical Part generally consists of the following:o Detailed Technical Specification related to Civil,
Mechanical, Electrical Works, as applicable, to be carried out
o Mode of measurements
o Bill of Quantities
o Drawings
o Other technical details
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Technical Specification etc.
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Contract management is successful if:o the arrangements for service delivery continue to be
satisfactory to both parties
o the expected business benefits and value for money are being achieved
o the client/ supplier/ contractor is co-operative and responsive
o the organisation understands its obligations under the contract
o there are very little disputes and the differences can be sorted out through the Contract Clauses
WHEN IS A CONTRACT MANAGEMENT SUCCESSFUL?
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DOsDo Spend time reading and understanding the contract, particularly the contract management and dispute resolution procedures Do flow down your knowledge of key contract processes to members of your internal team
Do notify the Employer in line with the contract if you think you may not meet targets with consequences due to reasons not attributable to you
Do notify the Employer in line with the contract if you think that some extra- contractual work is to be carried out
Do use the daily, monthly reports etc., analyze the reasons and keep records for future necessity
DOs and DON’Ts
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DON’TsDon’t simply put the contract on the shelf once it is signed.
Don’t issue unnecessary letters of minor nature.
Don’t use any unethical or unscrupulous languages while writing a contractual letter
Don’t forget to record any correspondence or instruction given verbally which may give rise to future contractual claims
DOs and DON’Ts (....Contd.)
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ANY QUESTIONS?
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35URS Scott Wilson India